China is one of the fastest-growing economies in the world, and foreign retailers have been hard at work establishing a presence there for more than a decade. Now, a relatively new service will make it possible for millions of Chinese consumers to make online purchases from international retailers.

	Alipay, China’s leading independent third-party online payment and settlement platform, often is compared with PayPal, says Philip J. Philliou, a partner in Philliou Selwanes Partners (PSP), a New York-based consulting firm working to promote acceptance of the payment service by merchants. Alipay, he says, has more than a
50 percent share of China’s online payment market, including 70 percent of the business derived from Taobao.com, that country’s largest consumer-to-consumer online shopping site and second only to eBay worldwide.

 
Alipay has more than 56 million users in China and is adding an average of more than 80,000 users per day. Average daily volume exceeds one million transactions and $23 million.

To enable Chinese online buyers to be able to purchase from foreign retailers, Alipay was required to secure approval from the Chinese government. Two large state-owned banks, the Bank of China and China Construction Bank, helped in securing this approval. Overseas spending by Chinese citizens is capped at $50,000 a year per person.
                                   
Similar to PayPal, merchants transmit the transaction information directly to Alipay. The online payment system then checks the foreign exchange rate from a domestic bank and shows the price of the product to the buyer in Chinese Yuan. The transaction is completed when Alipay sends confirmation of payment to the merchant, which then ships the merchandise to the buyer.

Alipay and PSP are targeting Chinese Urban Professionals. “Chuppies” are Internet savvy, love American goods and have disposable income. A 2006 survey conducted for UPS by Research International found that Chinese consumers are most attracted to two kinds of U.S. products: books/videos/music and consumer electronics.

Young Chinese consumers are more willing to buy various kinds of U.S. products, according to the survey, especially some “new lifestyle” products like coffeemakers.

“If China’s 163 million Internet users shop the same way that the Chinese who are vacationing abroad do, then PSP can add lots of value to U.S. merchants,” Philliou says. “The Chinese who travel abroad buy high-quality goods that low-cost Chinese manufacturers aren’t yet capable of producing.”

Removes payment barriers
In spite of China’s economic expansion, opportunities for U.S. online retailers have been limited by the two countries’ differing payment systems. “The agreement between Alipay and PSP removes these barriers and opens up new potential for merchants to add millions of dollars in new sales volume from an untapped marketplace,” Philliou says.

“Alipay addresses current business obstacles such as the high currency conversion rate on international credit cards and the fact that few Chinese Internet users have an international credit card.”

PSP is working with select online retailers to integrate Alipay into their payment mix. Outside China, Alipay has partnered with three overseas retailers: Hong Kong-based cosmetics retailer Sa Sa International Holding; StrawberryNet, “the world’s largest provider” of discount skin care, cosmetics and fragrance, also based in Hong Kong; and Japan-based JShoppers, a subsidiary of Nissen Holdings that sells Japanese clothing and accessories.